In a two-part Law360 series, Norfolk office managing partner John Padgett, who co-leads McGuireWoods’ transportation industry team, analyzed key challenges confronting the maritime industry.
In the first installment, published Sept. 12, Padgett told Law360 that higher fuel costs and stricter fuel regulations taking effect in 2020 are a greater concern to the shipping sector than new developments in trade policy. He also described how a post-recession surge in orders for new vessels outstripped the actual growth in shipping demand, allowing larger carriers to seize more of the industry’s market share.
“The result is that prices are still not rising, in part due to overcapacity. Over time, this market trend will create an oligarchy within the industry,” Padgett said. “The industry only saw a 3 percent increase in capacity, but the top six carriers now control 68.1 percent of the industry’s market share. At the start of 2016, this same top-six group controlled only 49.9 percent. As a result, carriers that have less capacity are falling further behind.”
In the second part of the series, published Sept. 13, Padgett said autonomous ships are on the horizon but won’t be widely implemented until the lifecycles of the current generation of vessels expire.
“Yet, the reduction of crews will allow vessels to be redesigned to eliminate some of the traditional infrastructure used exclusively for the crew and human navigation,” Padgett said.